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Democrat Terry McAuliffe launches his successful gubernatorial campaign in May at the Virginia Biotechnology Research Park. He won 47.75 percent of the vote, defeating Republican rival Ken Cuccinelli.

Terry McAuliffe is set to be sworn in Saturday as Virginia's 72nd governor amid a swirl of festivities co-chaired by best-selling crime author John Grisham and bankrolled by corporate heavyweights. Altria, Dominion Resources and Verizon have kicked in $50,000 each.

McAuliffe's chosen theme is bipartisanship. Through his cabinet selections and his public statements, the Democrat is offering an olive branch to highly conservative Republicans who control the House of Delegates and hold great sway over the Senate.

"The challenge for him is to find some sort of consensus," says Stephen Farnsworth, a political science professor at the University of Mary Washington. It will be a tough task after McAuliffe's narrow defeat of staunch conservative Attorney General Kenneth Cuccinelli in one of the most venomous contests in recent Virginia history.

McAuliffe's peace ploy involves praising Gov. Robert F. McDonnell, going so far as to publicly sympathize with the humiliation the outgoing governor has faced as the target of state and federal corruption probes. None of McAuliffe's Democratic cabinet picks is controversial. And he's decided to keep McDonnell's finance chief, Richard D. Brown, as well as health boss, William A. Hazel.

McAuliffe has baggage. He's been regarded as a national Democratic apparatchik with no experience as an elected official and several prominent, private business failures. Countering the image, McAuliffe has touted his deal-making skills that will be put to the test. Consider:

Medicaid: The No. 1 issue is buttressing the state's Medicaid system after McDonnell and the General Assembly refused $2.8 billion in funding that would pay 100 percent of the state's costs for three years. It's a tough task given the botched launch of President Barack Obama's health exchanges under his Affordable Care Act in October.

The offer to expand health benefits to about 400,000 poor people was spurned by Republicans, who saw it as budget-busting and helpful to the loathed Obamacare. McAuliffe contends that the move will deny the state needed jobs and hurt the poor.

McAuliffe's hurdle is to find common ground with the General Assembly for a deal to accept the expansion. To help, he's keeping Hazel, who's reported that shunning federal money could cost health systems at Virginia Commonwealth University and the University of Virginia $500 million.

Retaining Hazel is surprising. During the campaign, McAuliffe constantly contrasted his pro-choice position against Cuccinelli's more conservative views. Hazel has been attacked for promulgating tough abortion clinic regulations that have resulted in the closure of many such facilities, including NOVA Women's Healthcare in Fairfax and the 40-year-old Hillcrest Clinic in Norfolk. Hazel also has taken hits from such conservatives as Annie Celotto, Virginia head of the Americans for Prosperity, for backing Obamacare. Hiring him is "an all too cozy relationship," Celotto writes.

Ethics Reform: A bigger news story than the nasty gubernatorial race has been McDonnell's legal woes after he and his family accepted more than $165,000 in gifts and loans from Jonnie R. Williams Sr., former head of the struggling Star Scientific dietary supplement maker.

It was the worst ethics scandal in years in Virginia, which has among the most lax disclosure rules in the nation. Calls went out for a special legislative session to put more bite into laws and perhaps create an independent state ethics commission to probe transgressions. Although federal prosecutors say they want to ask for McDonnell's indictment, a decision has been delayed at higher federal levels.

McDonnell's plight puts McAuliffe at a political disadvantage. The governor-elect backs tougher ethics rules, but an indictment against McDonnell "poses more difficulty for McAuliffe," says Robert Holsworth, a Richmond political analyst. It would anger Republican legislators whose support McAuliffe needs and would "take his agenda off the front pages," Holsworth says.

Speculation exists that McAuliffe, the former head of the Democratic National Committee, is sending back-channel messages to the Obama administration to tread lightly with McDonnell. Publicly, McAuliffe says the investigation should proceed. "I hope and pray that everything works out for the sake of the Commonwealth and the governor and his family," he says.

Mental Health: The tragedy of Gus Deeds, the mentally disturbed son of Democratic politician Creigh Deeds, has drawn attention to the state's unresolved mental health system needs. Gus Deeds killed himself in December after stabbing his father. The younger Deeds underwent a psychiatric evaluation a day before he attacked his father, but was released because no bed was available. The state boosted mental health funding by $42 million after a disturbed Virginia Tech student opened fire on campus in 2007 and killed 33 people. But most of the funding withered away in the recession.

McDonnell, who'd cut spending, has proposed $38 million more in funding in his outgoing draft budget, which McAuliffe supports. He also needs to find practical ways to help, such as implementing a statewide data system to locate emergency psychiatric beds.

Transportation: During the campaign, McAuliffe was quick to praise McDonnell's complex transportation package, which provides real money for roads for the first time since 1986. The legislation drove a wedge between McDonnell and fellow Republican Cuccinelli, who initially opposed the plan.

Now McAuliffe must oversee the expenditure of the $3 billion raised by the new plan. Key challenges are unscrambling clogged roads in Northern Virginia and Hampton Roads and maintaining crumbling ones in greater Richmond.

Education, jobs and the environment: McAuliffe ran, as did Cuccinelli, on standard positions about reforming standardized testing. He'll also deal with proposals to privatize such elite state schools as the University of Virginia and the College of William and Mary. Last week he selected Anne Holton, the wife of former Virginia governor, U.S. Sen. Tim Kaine, and daughter of former Gov. Linwood Holton, as his education secretary.

Jobs-related education was a big campaign issue. McAuliffe visited more than two dozen community colleges in the state, noting that they help spawn the jobs the state needs.

But employment issues have been problematic for McAuliffe given his less-than-stellar experience with private sector start-ups such as electric carmaker GreenTech. He's selected as his commerce secretary Maurice Jones, an Obama official and former publisher of The Virginian-Pilot, whose parent company owns Style Weekly.

McAuliffe seems to have backed away from his formerly progressive views on energy and the environment. He's toned down his opposition to coal and seems unlikely to spearhead a drive to set mandatory goals for utilities to use renewable energy sources such as wind and solar.

The regime McAuliffe has so far assembled looks a lot like McDonnell's without the divisive social issues, and it appears business-friendly in the style of fellow Democrats Tim Kaine and Mark Warner.

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TO GO
Saturday's schedule of events includes:

Inaugural Ceremonies
Gov.-elect Terry McAuliffe will be sworn in, along with Lt. Gov.-elect Ralph Northam and Attorney General-elect Mark Herring, on Saturday, Jan. 11, at noon. The ceremony at Capitol Square is open to the public but there's a waiting list. Request a ticket at inauguration2014.com.

Parade
More than 25 groups from across Virginia will participate in the inaugural parade, which follows the swearing-in ceremony.

Open House
The new governor and first lady will greet the public at an open house, held at the Executive Mansion on Capitol Square from 3-5 p.m. No tickets are required.

Richmond Inaugural Ball
Tickets are $75, available at inauguration2014.com/richmondballtickets. The black-tie event will be held at the Verizon Wireless Arena at the Stuart C. Siegel Center. Doors open at 7:30 p.m., event begins at 8.

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